> 1) being restricted to exact matches in input is definition of Markov Chains
Here's wikipedia:
> a Markov chain or Markov process is a stochastic process describing a sequence of possible events in which the probability of each event depends only on the state attained in the previous event.
A Markov chain is a finite state machine in which transitions between states may have probabilities other than 0 or 1. In this model, there is no input; the transitions occur according to their probability as time passes.
> 2) LLMs are not Markov Chains
As far as the concept of "Markov chains" has been used in the development of linguistics, they are seen as a tool of text generation. A Markov chain for this purpose is a hash table. The key is a sequence of tokens (in the state-based definition, this sequence is the current state), and the value is a probability distribution over a set of tokens.
To rephrase this slightly, a Markov chain is a lookup table which tells you "if the last N tokens were s_1, s_2, ..., s_N, then for the following token you should choose t_1 with probability p_1, t_2 with probability p_2, etc...".
Then, to tie this back into the state-based definition, we say that when we choose token t_k, we emit that token into the output, and we also dequeue the first token from our representation of the state and enqueue t_k at the back. This brings us into a new state where we can generate another token.
A large language model is seen slightly differently. It is a function. The independent variable is a sequence of tokens, and the dependent variable is a probability distribution over a set of tokens. Here we say that the LLM answers the question "if the last N tokens of a fixed text were s_1, s_2, ..., s_N, what is the following token likely to be?".
Or, rephrased, the LLM is a lookup table which tells you "if the last N tokens were s_1, s_2, ..., s_N, then the following token will be t_1 with probability p_1, t_2 with probability p_2, etc...".
You might notice that these two tables contain the same information organized in the same way. The transformation from an LLM to a Markov chain is the identity transformation. The only difference is in what you say you're going to do with it.